VTSAX and VOO are the two largest index funds investors should consider when building their portfolios.
The Vanguard Total Stock Market Index, commonly known as VTSAX, and the Vanguard S&P 500 Index ETF (VOO) might seem similar to investors. But there are essential differences between both funds that investors should consider before deciding which one to invest in.
This guide will go over these differences and give you a thorough explanation of both. The guide’s goal is to provide enough information on VTSAX vs VOO so you can decide which investment fund to build your portfolio around.
Before we begin, we must emphasize that this website doesn’t focus on investment recommendations. Instead, we aim to educate eager investors and provide guidance.
With all that said, let’s start.
What Is Vanguard Total Stock Market Index Fund (VTSAX)
Vanguard Total Stock Market Index Fund, or VTSAX, exists to track the performance of the U.S. stock market or CRSP US total market index. This fund holds a diverse range of stocks of all cap sizes. The list includes large, mid, and small-cap stocks and growth and value stocks. So far, VTSAX holds 3535 stocks with a low expense ratio of 0.04%, which means it charges low fees to investors.
Investing in VTSAX is only possible with a minimal $3,000 initial investment.
What Is Vanguard S&P 500 Index Fund?
On the other hand, VOO, or the Vanguard S&P 500 Index Fund, only tracks the performance of the 500 biggest publicly traded companies in the U.S., as the name suggests. In addition, this fund holds large-cap stocks primarily, with most stocks coming from the tech sector. As a result, VOO has a slightly higher expense ratio of 0.03%.
Other than that, VOO holds only 508 shares and doesn’t offer the possibility to invest in fractional shares.
Now that you have a general idea of VTSAX vs VOO, let’s look at the main differences between both investment funds.
VTSAX vs VOO Differences
The differences between investment funds will provide even more information to plan your future moves. Despite being similar, there are significant differences between both funds.
The first difference between VTSAX vs VOO is the cap size. Namely, VOO tracks only large caps. Given that the fund tracks the S&P 500 index, you will rarely find a mid-cap.
On the other hand, VTSAX tracks large-caps, mid-caps, and small-caps.
VTSAX offers a more diverse portfolio. It includes stocks from different sectors and market capitalizations. For example, 84% of the VOO fund is made of large caps, compared to 73% for VTSAX.
This means two things. One, VTSAX is less susceptible to market fluctuations and the performances of specific sectors. Two, VOO is heavily susceptible to potential market fluctuations. Remember that VOO tracks the S&P 500 index, which predominantly includes companies from the tech sector. Considering that, it’s important to remember that VOO can succumb to market fluctuations more easily than VTSAX.
Another difference in the VTSAX vs VOO debate is market performance. This is a crucial difference that investors must pay attention to. Looking at the historical performance of both funds, we can conclude the following:
- Both VTSAX and VOO share similar market performance over the past ten years.
- Over the past decade, VOO has outperformed VTSAX with an average annual return of 13.39% compared to 13.02% for VTSAX.
- Over a one-year period, VOO has seen a negative performance of -14.50%, compared to -17.09% for VTSAX.
The stats show almost identical market performances. With that said, these numbers do not necessarily indicate future returns, as is the case with the performance over the past year. Given that, it’s essential to consider other factors when deciding between these two funds.
To finish up, we will name other differences investors should pay attention to when choosing between VTSAX vs VOO. Those are:
- VOO is an Exchange-Traded Fund
- VTSAX is an Admiral Fund
- VTSAX’s number of holdings includes 3535
- VOO’s number of holdings includes 508
- VTSAX has a minimum investment of $3,000
- VOO doesn’t have a minimum investment
- VOO holds major tech stocks (Alphabet, Amazon, Tesla, Microsoft, Apple)
- VTSAX holds stocks from different sectors (healthcare, tech, consumer services, financial, and industrial). It also holds Apple, Amazon, Google, Tesla, and Microsoft stocks.
Choosing between VTSAX vs VOO as the desired investment fund depends on several factors. None are most important than your goals and risk tolerance. For example, VTSAX may be better for investors looking to diversify their investment portfolio.
On the other hand, VOO may be more suitable for investors looking to invest in the tech sector. Look at both sides to determine which investment fund is right for you.